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What are student loans?

Student loans are a type of personal loan designed to help students cover the cost of expenses related to their education. Just like a standard personal loan, a student loan allows you to borrow a specific amount of money to be used on eligible purchases. You then repay the loan amount plus interest to the lender, in instalments, over a predetermined period of time.

What can a student loan be used for?

There are certain expenses that inevitably arise when you've made the decision to further your education. And many students rely on student personal loans to assist with some of these costs.

Student loans can be used for a wide range of purposes, including the following:

  • Tuition fees
  • Course fees
  • Textbooks
  • Stationary
  • Computers and other necessary devices
  • Living expenses such as rent

Is a student loan just for university students?

Most personal loan providers in Australia offer student loans to not only those studying at university, but also TAFE and other higher education institutions such as private colleges and short course providers.

The best way to determine whether you may be eligible for a student loan is to check the specific lending criteria or reach out to your preferred lender directly.

What student loans can I get from the Australian government?

Before applying for a personal loan, it might be worth exploring the other options that may be available to you. Some Australian students may be eligible for certain types of government loans or other financial assistance to help pay for education expenses. 

Student loans for university

If you have been offered a Commonwealth supported place (CSP) in a university degree, you will generally be eligible for a HECS-HELP loan from the Australian government. A HECS-HELP loan is a higher education loan program that covers the upfront cost of tuition, allowing students to study now and pay off their tuition later. 

Keep in mind that while a HECS-HELP debt won't necessarily accrue interest, it's still subject to inflation and is a liability that has requirements in terms of how and when it is to be paid off. 

Student loans for TAFE

A VET Student Loan, formerly VET FEE-HELP, is similar to a HECS-HELP loan in that it assists with the cost of tuition. The way in which they differ is that they are offered to students undertaking vocational education and training (VET) courses, such as TAFE courses, as opposed to university degrees.

Centrelink payments

Eligible students, trainees and apprentices may be eligible for financial help with everyday costs of living, as well as some study expenses, through Centrelink. Centrelink is a government agency that provides social security payments and services to Australians.

The main income support payments offered by Centrelink to those studying or training are Youth Allowance, Abstudy or Austudy, each of which have separate eligibility requirements. Those who are eligible may also be approved for Rent Assist which is an additional payment that can be used towards the cost of rent.

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Who can get a student loan?

Just like most financial products, eligibility for student loans in Australia will ultimately be determined by the credit provider. 

Most lenders will require borrowers to meet the following criteria at a minimum:

  • Aged 18 years or older
  • Australian citizen, permanent resident or eligible visa holder
  • Employed on a permanent (full-time or part-time) basis

Many lenders will also require borrowers to additionally meet a minimum annual income, have a good credit rating, and often more.

It's worth checking your preferred lender's eligibility criteria or consider reaching out to them directly for more information.

Do you have to be an Australian resident to get a student loan?

If you aren’t an Australian permanent resident, there may still be options available to you. It's important to carefully examine the eligibility criteria of your preferred lender to see if they provide financing for non-permanent residents, like international students.

Are there age limits on who can get a student loan?

Most lenders don't specify an upper limit in regards to the age of eligible student loan borrowers. But, it's important to familiarise yourself with the terms of your preferred loan product before you begin your loan application process, as each product will have different requirements.

Generally, the only age restriction placed on student loans is that the borrower is at least 18 years of age. This restriction applies to any kind of credit product.

Can you use a guarantor for a student loan?

If you've never taken out a credit product under your name before, including a credit card or even a mobile phone plan, there's a chance you won't have anything recorded on your credit history and in turn don't have a credit score. 

This can sometimes make it more difficult to get approved for a loan as the lender can't see what kind of borrower you are and what level of risk you pose. However, there are ways you may be able to work around this, including using a guarantor.

Having a family member or friend act as a guarantor involves having them co-sign the loan and agree to accept responsibility for the repayments if you default. Basically, a guarantor acts as a type of security, making it less risky for your lender to loan you funds and more likely you may be approved for a loan with little to no credit history.

What are the pros and cons of student loans?

In order to make an informed decision before applying for a student loan, it's important to weigh up the potential pros and cons.

  • Enables you to invest in your future by helping you fund your upfront education costs.
  • May have lower interest rates than other financial products.
  • Allows you to better focus on your studies without the worry of taking on more paid work than your time permits.
  • If you are a young student, you may not have a comprehensive credit history, making it more difficult to receive approval or more likely to be offered a high interest rate.
  • Risk of falling into financial strife if your repayments become too costly for you to afford.
  • Deferring payments will generally mean paying more in interest charges.

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What are the features of a student loan?

Before you begin shopping around for a student loan, there are a number of factors you'll need to consider in order to find the most suitable loan options for you. Here are some of the most important features to evaluate:

Secured vs unsecured

A secured loan allows you to put down an asset, such as a car or equity in a home, as security on your personal loan. This usually results in a lower interest rate as you’re generally seen as a less risky borrower. However, it is more common for student loans to be unsecured. Unsecured loans don't require the borrower to put down an asset as security, but usually come with a higher interest rate.

Interest rates

One of the first features that many consider is the loan's interest rate. The interest rate will determine how much you will pay in interest charges over the life of the loan. You will also typically need to choose between a fixed interest rate that stays the same throughout the loan term, or a variable rate that can fluctuate with the market. Fixed rates may provide more certainty, but variable rates often provide more flexibility.

Comparison rates

Comparing different comparison rates can give you a better idea of the total cost of a loan, as they include both the interest rate and standard fees as a percentage figure. Keep in mind that some fees may not be included in the loan's comparison rate.

Tranche funding

Some lenders may offer to release your funds in portions throughout the length of your course instead of a single lump sum figure. Speak to your preferred lender to see if they are able to offer this feature.

Repayment schedule

May lenders allow you to choose your student personal loan repayment schedules, such as fortnightly or monthly repayments, allowing for flexibility in your budget planning.

Loan term

The loan term is the length of time you have to make loan repayments towards your loan amount, usually between two and five years. Opting for a longer loan term may result in more affordable repayments, but higher total interest payable, whereas a shorter loan term may mean more expensive repayments but less spent on interest charges. The most suitable option will depend on your personal financial situation.

How to find the best student loan

While shopping for a student personal loan can sometimes feel overwhelming, RateCity has a number of comparison tools that may take some of the hassle out of the process.

Comparison rate table

RateCity's comparison tables, like the student loan comparison table on this page, allows you to compare apples to apples. Simply use the filters to narrow down your search to the loan products that best suit your needs.

Personal loan calculator

RateCity's personal loan calculator can give you an estimate of how much your student loan repayments may cost based on your preferred borrow amount, interest rate and loan term. It can also provide you with an estimate of the total cost of the loan and total interest payable.

Real Time Ratings™

Real Time Ratings™ is a world-first rating system that ranks personal loans based on your individual lending requirements. It gives each personal loan a score out of five stars, based on loan costs and flexibility.

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.

Can students with no credit history get loans?

It is possible for students with no available history of borrowing or managing money to get a personal loan, though it may be more difficult as well as expensive than for borrowers with a good credit history.

Having no credit history means having no credit score. While many lenders may consider having no credit score to be better than having a bad credit score, they may still consider it riskier to lend to an unknown borrower and may charge higher interest rates or fees than to borrowers with good credit scores.

Is a personal loan a variable or fixed-rate loan?

Depending on the personal loan lender, you may be able to choose between a fixed and a variable interest rate. But, there are a few distinct differences between the two, so it’s important to weigh up the pros and cons before deciding on what’s right for you.

A fixed interest rate loan gets you the convenience of knowing exactly how much you need to repay each fortnight or month. On the other hand, you generally won’t be able to make lump sum or advanced payments to close your personal loan early - or at least not without a penalty.

With a variable interest rate personal loan, you may be able to get a longer loan repayment term, with the option of paying off the loan early. You typically won’t need to pay any additional charges for an early full repayment either. The potential disadvantage with an interest rate that can change is that your repayment is not entirely predictable, as it can fluctuate with the market. However, you’ll likely have more options as more lenders offer a variable interest rate personal loan.

Can I merge my personal loan with my home loan?

Yes, you can refinance your home loan and, in the process, merge or consolidate your personal loan and home loan. By doing so, you can lower the number of debts you have, and you may also reduce the total interest you have to pay.

However, you should consult a financial advisor or a mortgage broker to confirm that you are decreasing your total outstanding debt, including interest payments. The repayment term for a home loan can be much longer than that for a personal loan, and by merging the two, you could be repaying a higher amount over the full term.